Norwegian Air Considers Next Steps After U.S. Clears Trans-Atlantic Expansion

Hanna Hoikkala and Nicholas Brautlecht , Bloomberg

- Dec 05, 2016 4:00 pm

Skift Take

Some of the recent stories on Norwegian Air a little misleading. The company, through its Norway-based airline, already had the right to fly any route it wanted between the United States and the EU. But this new approval should give Norwegian more flexibility in how it runs its business, and should lead to more flights and lower fares.

Shares of Norwegian Air rose as much as 14 percent on their first day of trading since the Department of Transportation concluded Friday that the company’s Ireland-based Norwegian Air International arm is fit to serve U.S. destinations.

The decision opens the door to “more flights and more jobs on both sides of the Atlantic,” Norwegian Air spokesman Anders Lindstrom said. Critics of the plan say the Irish unit will amount to a “flag of convenience” that permits the group to unfairly slash costs by tapping Irish labor laws to outsource employment contracts beyond Europe.

Lowering costs is a key consideration for the carrier as it seek to survive in a trans-Atlantic market where no-frills predecessors such as Laker Airways failed. The introduction of Boeing Co.’s 787 carbon fiber jetliner to the fleet has already delivered a step change in operating expenses, with fuel burn reduced by as much as 20 percent compared with older planes.}

Delta Squeezed

Increased competition on trans-Atlantic routes has hurt some established carriers, with Delta Air Lines Inc. blaming low-cost rivals for a slump in third-quarter earnings from the traditionally lucrative market and saying it will need to evaluate some services in the longer term.

The DoT decision undermines legal protections for airline workers, according to the Association of Flight Attendants, the largest U.S. cabin crew union, which called on President Barack Obama to use his executive powers to reverse the ruling. The Air Line Pilots Association said separately that the approval was “an affront to fair competition” that would cause U.S. job losses.

In April, U.S. regulators gave a tentative nod to the application. When final approval didn’t immediately follow, the European Union’s executive arm triggered an arbitration case in July to push for a ruling.

Norwegian Air pledged in its application to abide by hiring and employment practices, according to the DoT, which said the case was among its “most novel and complex,” adding: “Regardless of our appreciation of the public policy arguments raised by opponents, we have been advised that the law and our bilateral obligations leave us no avenue to reject this application.”

Norwegian said the impact of the decision “will not be immediately visible” since existing trans-Atlantic operations, including those from London Gatwick, are performed using a license from its home country. It reiterated that it aims to have a 42-plane long-haul jets by the end of the decade, though Kjos has said more could be ordered in response to a green light on the Irish plan.

Shares of Norwegian Air were trading at 295.30 kroner as of 3:45 a.m. in Oslo, narrowing their decline this year to 8.7 percent and valuing the business art 10.6 billion kroner ($1.26 billion).

Photo Credit: A Norwegian Boeing 737 taxies at London Gatwick. Norwegian has been using 737s on short flights for years, but next year it will take its first long-range version of the plane, which should fly to the Eastern United States. Andrew Thomas / Flickr